MGN600

CORPORATE STRATEGY
AND
DECISION SIMULATION

Session-02
HERO CYCLES

• 62 Year Old Company

• Punkaj Munjal
• 40% share of the Indian market,
HERO CYCLES
CYCLE INDUSTRY MARKET SHARE
COMPARISON
INDUSTRY GROWTH
HERO CYCLES

• Hero Cycles is facing stagnating growth.

• The mainstay Roadster, the sturdy bicycle used
by millions of Indians to commute, has
saturated as a segment.
COMPETITION

• The industry sees pressure mounting from foreign brands such

as Giant, Phoenix or Trek.
• China-made cycles have also made their presence felt in the
market, and AICMA feels there is some under invoicing
happening with imports from China.
• In Shanghai, there are plenty of aged cyclists, of 70 years or
more, cycling through demarcated lanes on busy road.
INDUSTRY CHALLENGE

• In China, 37% of households own a

bicycle. In Scandinavia, household
ownership of bicycles is at 110%,
meaning, many households have
more than one bicycle. In India, this
figure is 9%.

• This is major challenge that is

seemingly insurmountable — Indians
don’t particularly like cycling.
HERO CHALLENGE

• Sales fell by 12% in 2016-17.

• Profits declined by 57%, from Rs

58.46 crore in 2015-16 to Rs 25.15
crore in 2016-17.

• The HMC group of companies

under Pankaj Munjal recorded a
turnover of Rs 2,496 crore in 2016-
17 with profit before tax of Rs 114
cr.
THE BIG QUESTION
INDUSTRY CHALLENGE

• In China, 37% of households own a

bicycle. In Scandinavia, household
ownership of bicycles is at 110%,
meaning, many households have
more than one bicycle. In India, this
figure is 9%.

• This is major challenge that is

seemingly insurmountable — Indians
don’t particularly like cycling.
SOLUTION

 The AICMA has lobbied the

government for a national
bicycle policy and also the
creation of a bicycle
development council.
 Representations to the Prime
Minister’s Office
 Set up a National Urban Active
Travel Ways Authority of India
through an act of Parliament.
HERO STRATEGY

Hero Cycles is now pursuing a two-pronged strategy.

 The first part involves e-bicycles, which can run on

battery power, pedal power, or a combination of the
two.
 The second part involves launching a model in the
Roadster segment that is significantly cheaper than
existing options. It’s offering affordability at the price
sensitive end of the market, and innovation at the top
end.
WHY ROADSTER

• The largest segment (17 million bicycles a year),

accounting for some 55-60% (9-10 million units) of
sales.

• This segment not seeing growth. It is also losing out

to motorised two-wheelers can be bought on EMIs.

• There is, however, an unlikely lifeline that has been

keeping the segment alive. State governments like to
give away cycles under various schemes and the
Roadster remains the popular.
ALTERNATIVE SEGMENT

• The urban biking segment, where bicycles are bought as a

hobby or for exercising.
• Massive 25% growth. Known as the fancy segment these cycles
make up another 25% of the market.
• The remaining 15% are bicycles for kids.
• The super-premium segment, where bicycles are priced more
than motorcycles, is also seeing a 20% annual growth.
ALTERNATIVE SEGMENT

• New model, called Lectro.

• Hybrid: Looks like a regular bicycle but has a battery hidden
inside its frame.
• Single charge, which takes 3.5 hours, the bicycle can run 30-40
km
• Mode shifter, a user can choose to run it fully on battery power,
pedal power or a mix.
• Price: Rs 27,000.
LOBBY

• Plan to launch versions of the e-cycle, launch two-

wheeler load carriers, and battery-powered three-
wheelers either.
• Apart from expanding the market at the top end, the
e-bicycle will also help differentiate Hero Cycles in a
segment that is getting busier.
THANK YOU